Economy Hits Growth of Overseas Phone Calls
After a decade of explosive growth, the volume of international telephone calls increased at the slowest pace on record last year as tough economic times helped put the squeeze on dialing overseas.
Consumers and businesses worldwide spent 144 billion minutes -- or a combined total of 274,000 years -- on calls abroad in 2001.
That was just an 8.5% jump over 2000, a year in which call volume grew a record 23%. And it was well below the 14% annual average growth rate since records were first compiled in 1984, according to a new report by Washington-based research firm TeleGeography Inc.
Stephan Beckert, a TeleGeography analyst who directed the research, said that when results for 2002 are compiled, he expects them to show growth closer to historical levels. Other industry experts, however, think the sluggishness has continued this year.
Last year, not even plummeting prices slowed the slide in growth. Instead, falling prices fueled by better technology and new competition pummeled the bottom lines of telecommunications companies -- and they are unlikely to find much relief soon.
“Prices worldwide have fallen 70% to 90% in the past two years, and companies need a tenfold increase in volume just to keep revenues even,” Beckert said.
TeleGeography tracks international calls from statistics gathered in its own worldwide survey of 4,700 companies in 123 countries and from data that some 1,800 U.S. international carriers are required to file with the Federal Communications Commission. No filings are required for domestic long-distance calls, and companies keep those numbers secret.
International calling -- from regular lines, cell phones and calling cards -- is an important gauge of overall market trends. Excluded from the report, and unable to be measured, are business calls over private corporate networks and data traffic such as Internet e-mails.
Analysts attribute last year’s slide to the sluggish economy, reduced business activity worldwide and a slowdown in travel, particularly after the Sept. 11 terrorist attacks. International trade through the United States fell 6% last year, according to Commerce Department statistics.
In the past, Beckert said, business calls have accounted for half of global call volume. But 30% of all calls come from mobile phones these days, he said, and even carriers can’t figure out if they are business- or consumer-generated.
“When we see a return of economic growth, we’ll see a return in international calling,” said telecom analyst Ken McGee of Gartner Inc., a research firm in Stamford, Conn. “And if you believe the forecasts, that means we’ll see it later in 2003.”
In contrast to last year’s falloff, international calling soared from 1991 to 2001. During that period, U.S. calls to foreign countries grew more than sixfold to 37.3 billion minutes amid a nearly fourfold increase in total worldwide voice traffic.
Mexico and Canada were, by far, the top destinations called from U.S. phones last year, each accounting for about 5 billion minutes in outgoing calls, according to the report. Beckert said carriers don’t know what’s driving such calls, but they suspect that about 10% of it is foreign traffic being rerouted through cheaper U.S. lines.
Hans Johnson, a researcher at the Public Policy Institute of California, figures immigration helped drive the Mexico calls; the number of Mexican-born residents in the United States doubled in the last decade.
E-mails, especially as a replacement for faxes, have taken a bit of a bite out of international calling, but Beckert maintains that the loss is not significant.
Even so, Boon Intrarakha, whose Thai Dynasty Carpet Inc. in Artesia relied heavily on telephone fax machines a few years ago, is now conducting most business over the Internet.
“The telephone is actually not being used a lot right now,” he said, adding that he relies on e-mail most of the time to contact his brother and sister in Bangkok.
Growth in personal calling may be slower to recover than that in business calling, particularly if prices rise again.
“Basically, everyone who wants to call overseas in Europe and the U.S., which together make up two-thirds of the international traffic, already is, and they aren’t calling much more,” Beckert said.
McGee points out that many immigrants have a limited list of people to call.
“It’s Mom in Ireland, a sister in Ireland, a brother in Israel,” he said.
Indeed, personal calling “may have reached a point of relative saturation,” said Bill Marmon, vice president of WorldCom Inc.’s international unit, the world’s largest carrier of international voice traffic.
“We see voice in general as a mature market, as opposed to data, so it makes sense that growth would slow,” he said, while also pointing out that international calling is “still a very important market and still growing.”
Rebecca Kim of Irvine uses low-cost calling plans that allow her to ring her family and friends in her native South Korea, but she still watches her time on the phone.
“I don’t want to go on and on and on. I limit myself to important things first, and I call when necessary,” she said. “I don’t call any more often just because the rates went down.”
Prepaid calling cards, which have become popular among travelers, also are being used to limit long-distance phoning.
Chelo Jarme of Cypress, who says she loses track of time on calls to her family in Manila, has been using cards for the last few years. When time runs out on the card, she said, “that’s it for the month.”
“Now I call two to four times a month, mostly to my mom. She wants to hear my voice,” Jarme said. “I do a lot of e-mailing with my three sisters.”
The slower growth in international calling has forced some changes at telecom firms from WorldCom and AT&T; Corp. to overseas conglomerates such as Deutsche Telekom in Germany, Beckert said.
The carriers have cut international calling costs, outsourced less profitable services and focused on promoting their major routes, he said. The changes are part of overall restructurings industrywide as carriers cope with too much global capacity and mountains of debt.
“Last year was not a great year for telecoms in general,” Marmon said. “At WorldCom, we did cut out some of our wholesale international voice business, and we’re more careful about the prices we are charging. The price decline has slowed.”
Last summer, WorldCom filed for bankruptcy protection. Of the top 10 international providers in 1999, seven have filed Chapter 11 petitions to reorganize debts or have gone out of business.
To help with cost cuts, telecoms also are turning more to an Internet technology known as Voice over Internet Protocol, or VoIP, to carry voice calls. VoIP allows telecoms to push phone traffic in Internet fashion to get around the high fees that other companies charge for completing calls.
VoIP transfers, which occur without callers even knowing it is happening, accounted for 9.9 billion minutes last year, 71% higher than the previous year. Adding that to the total, though, would increase overall growth to only 10%, TeleGeography said.
TeleGeography started compiling VoIP traffic in 1998, but it was barely a blip until 2000. Beckert said he expected the technology to become more of a factor in the coming years.
